Gold prices fell sharply because of the Fed, but the market may turn on "defense mode" for this reason

Gold prices today, July 7, 2023, may retest the support level of $1,914/ounce, with a high possibility of falling to the $1,903-1,909/ounce range, according to Reuters technical analyst Wang Tao. However, new tensions in US-China relations are a big unknown for the precious metals market.

LIVE UPDATE TABLE OF GOLD PRICE TODAY 7/7 and EXCHANGE RATE TODAY 7/7

1. SJC - Updated: 07/06/2023 15:43 - Website supply time - ▼ / ▲ Compared to yesterday.
Type	Buy	Sell out
SJC 1L, 10L	66,450	67,050
SJC 5c	66,450	67,070
SJC 2c, 1C, 5 phan	66,450	67,080
SJC 99.99 gold ring 1 chi, 2 chi, 5 chi	55,050	56,050
SJC 99.99 gold ring 0.5 chi	55,050	56,150
99.99% Jewelry	54,950	55,650
99% Jewelry	53,899	55,099
Jewelry 68%	35,996	37,996
Jewelry 41.7%	21,358	23,358

Gold prices fell after a strong, better-than-expected US jobs report. The figures released yesterday showed that the number of jobs increased twice as much as the market expected. This report pushed the USD Index off its lows and also pushed US Treasury yields up.

According to TG&VN at 9:30 p.m. on July 6 (Vietnam time), the gold price was trading at 1,928.2 USD/ounce. Last time, August gold fell 11.70 USD to 1,915.70 USD.

Specifically, the US employment report for June showed an increase of 497,000 jobs, compared to expectations of only 220,000. The yield on the benchmark 10-year US Treasury bond rose to its highest level in nearly four months and is currently at 4.031%. This data strengthens the determination of the "hawks" on monetary policy - supporting the US Federal Reserve (Fed) to raise interest rates.

Meanwhile, the minutes of the Fed's latest policy meeting were released on Wednesday afternoon and they also tended to be "hawkish". Accordingly, the minutes from the June 13-14 meeting showed that most Fed officials thought that keeping the Fed's base rate at 5.0-5.25% was "appropriate and acceptable", with some favoring a 0.25% increase. The minutes also said that "nearly all" FOMC members agreed that further tightening of US monetary policy was necessary this year.

Gold price today July 7, 2023: Gold price fell sharply due to the Fed's stance, continued to face devaluation pressure, may return to the threshold of 1,900 USD. (Source: Kitco)

Rising interest rates will increase the opportunity cost of holding non-yielding assets such as gold. In addition, investors are also watching developments surrounding China's restrictions on exports of metals important for semiconductor production, just ahead of a visit to Beijing by US Treasury Secretary Janet Yellen.

Expert Yeap Jun Rong, market strategist at IG company , commented that increasing tensions between the US and China could cause the market to "turn on defense mode", thereby promoting money flow looking for "safe haven" in the short term to gold.

Domestic gold prices suddenly increased slightly by about 50,000 - 100,000 VND/tael at some store systems nationwide.

Converting world gold price according to USD exchange rate at Vietcombank 1 USD = 23,870 VND, world gold price is equivalent to 55.11 million VND/tael, lower than SJC gold selling price by about 11 million VND/tael.

Summary of SJC gold prices at major domestic trading brands at the closing time of the trading session on July 6.

Saigon Jewelry Company listed SJC gold price at 66.45 - 67.07 million VND/tael.

Doji Group currently lists SJC gold price at: 66.40 - 67.00 million VND/tael.

Phu Quy Group listed at: 66.45 - 67.05 million VND/tael.

PNJ system listed at: 66.45 - 66.95 million VND/tael.

SJC gold price at Bao Tin Minh Chau is listed at: 66.46 - 67.03 million VND/tael; Rong Thang Long gold brand is traded at 55.44 - 56.29 million VND/tael; jewelry gold price is traded at 54.95 - 56.05 million VND/tael.

Gold prices could fall below $1,900/ounce?

In the international market, gold is under pressure to decrease in price as the USD exchange rate and US Treasury bond yields both increase due to expectations that the Fed will keep interest rates high for a longer period of time. The latest figures of the US labor market also show that the possibility of a dovish Fed will increase, thereby continuing to put downward pressure on gold prices.

However, some analysts have recently become optimistic as gold prices have held the $1,900/ounce mark amid the Fed’s projections for two more rate hikes this year. They say that if this psychologically important threshold fails to hold, a gold sell-off could occur.

In a move showing investors are cautious about the gold price outlook, the world's largest gold exchange-traded fund (ETF) SPDR Gold Trust sold a net 4 tons of gold in the session on Wednesday (July 5), reducing its holdings to 917.9 tons of gold.

Market commentary: Edward Moya, Senior Analyst at OANDA, said that if the $1,900/ounce level is broken, there will be a significant technical sell-off in the gold market. One of the reasons gold is holding steady above $1,900/ounce is because the market has not yet fully priced in the possibility of two more Fed rate hikes.

“Is inflation going to be more persistent, and is the Fed going to do two more rate hikes? Is that priced in? Not yet,” said Mr. Moya. Gold is not attractive right now, but could still explode if the market reassesses the Fed’s aggressiveness in fighting inflation.

“Fed rate hikes typically depress gold prices. But given the current market position, we could see a sell-off in equities and a strong return of safe-haven demand for gold. This is not an environment where gold will collapse,” said Moya.

The veteran OANDA expert is predicting that gold prices will continue to trade in a narrow range in the short term, with the risk of further declines if prices fall below $1,900 an ounce. “If gold falls below that level, the story could get worse. But I don’t think that will happen,” he said.

According to data from the CME FedWatch Tool, speculators are betting on a nearly 90% chance of the Fed raising interest rates by 25 basis points in July and a 70% chance of the Fed pausing interest rate hikes in September.

Source